Problem insurers face management shakeup, company liquidation

Problem insurers may face management shakeup and even company liquidation in an imminent sweeping insurance overhaul in lockstep with the current banking-sector reforms, officials say.

Under a new law in the making, any insurance con-man will get caught and punished.

The draft Insurer Resolution Ordinance 2025 is set to take a concrete shape as the Insurance Development and Regulatory Authority (IDRA) has convened a crucial meeting with all key stakeholders for Tuesday to finalise the draft.

Stakeholders from both life and non-life insurance companies are expected to attend the meeting, which will be presided over by IDRA Chairman Dr Aslam Alam, according to officials.

A letter obtained by The Financial Express states that stakeholders have been instructed to bring written observations and proposals on the draft ordinance, which was earlier uploaded on the regulator's website for review

Bangladesh Insurance Association (BIA), the apex body representing insurers, appears to be truant as it has so far not submitted any formal feedback on the draft, officials confirmed.

The move comes as the regulator seeks to introduce a powerful new legal instrument aimed at restoring public confidence in an industry plagued by long delays in claim settlements, higher management cost and weak governance.

Modelled on the country's bank-resolution framework, introduced by the interim government, the law on the anvil would grant IDRA sweeping authority to intervene in financially distressed insurers. The regulatory intervention may lead to restructuring, mergers, or liquidation of troubled firms, transfer of their assets and liabilities, or even creating "bridge insurers" to safeguard policyholders' interests.

Industry-insiders say the ordinance could prove to be a turning point for a sector where  several life insurers have been accused of failing to honour maturity claims, eroding trust among policyholders.

While non-life insurers are said to be in a relatively better financial shape, both segments are likely to come under the ordinance's purview.

"The draft will be finalised in Tuesday's meeting and sent to the Ministry of Finance for vetting," says a senior IDRA official, requesting anonymity.

"Once enacted, it will empower the authority to appoint administrators in troubled companies, remove their boards, and transfer viable portfolios to newly formed bridge entities."

The proposed law also contains strong punitive provisions, including the liquidation of personal assets of directors found guilty of fraud or embezzlement - a move aimed at signalling zero tolerance for financial malpractice in the insurance industry.

The IDRA officials say the law represents "the most ambitious reform effort in decades to address deep-rooted inefficiencies in the sector".

The country's insurance penetration remains among the lowest in South Asia, partly due to the industry's reputation for delayed payments, opaque operations, and poor corporate governance.

Non-performing claims (NPCs) and allegations of irregularities have long eroded public trust, leaving many households reluctant to buy insurance coverage despite rising financial risks from health, accidents, and climate-related disasters.

"The authority will have the power to liquidate a troubled company and facilitate ownership changes, mergers, or other restructuring," says one official familiar with the process.

"In special cases, the government or development partners may step in with bridge financing to ensure a smooth transition and protect policyholders."

jasimharoon@yahoo.com